Dealmakers Brace for a Big-Money Year

Last year wasn’t quite the merger-and-acquisition free-for-all some expected after Charter Communications began chasing Time Warner Cable in 2013, but it was a busy one, nonetheless. Although Time Warner Cable went to Comcast in a pending deal valued at about $67 billion, Charter will nearly double its size in a series of sales, swaps and spins worth an estimated $20 billion tied directly to that deal. There is pent-up demand from smaller players looking to consolidate, and robust debt markets are available to provide capital for projects ranging from simple upgrades to forays into online video, over-the-top services and wireless communications. For those reasons, Multichannel News, for the fourth year is profiling a new group of the top performers in the financing space. This is not a ranking (profiles are listed alphabetically) and it is not all-inclusive. But given the renewed focus on consolidation in the business, chances are cable operators of all sizes and shapes will run into at least one of these Money All-Stars.

Dan Alster,Executive Director, Syndicated and Leveraged Finance Group, JP Morgan

A 13-year veteran of JP Morgan, Dan Alster has watched the leveraged finance landscape change in the past several years from a concentration on debt refinancing, to tapping capital markets to helping fund original content and forays into technology.

Alster started at JP Morgan in 2002 and was thrust almost immediately into one of the industry’s most complicated transactions: restructuring Adelphia Communications. While that complex process was a bit of a trial-by-fire introduction to cable , Alster, a former captain in the Israeli Air Force, has seen the industry shift from a focus on finding the best interest rates for debt to securing financing for projects in original content and technology.

His client base has also expanded from a core group of distributors to content creators such as movie studios Lionsgate Entertainment, Metro-Goldwyn-Mayer and DreamWorks SKG; over-the-top video companies like Netflix; and tech companies such as Rovi and Go Pro.

The shift also has affected how clients approach financing, Alster said. In the past, if a distributor struck a content deal with a major provider, the cost was spread out over a period of time and paid off in equal increments, he said.

“When you create your own content, a large majority of [the cost] is up front,” Alster said, including items like production costs and paying actors. “It’s a very different business model. Then the question becomes, how do you finance it? That’s why they come to us.”

At JP Morgan, financing usually takes one of three routes — from high-yield bonds, which have longer terms (7-10 years) and typically about 600 to 700 institutional buyers to choose from; from the institutional loan market, which offers more secured financing and sits atop the company’s capital structure, with roughly 300 to 400 potential buyers, including institutional investors, money managers and institutional funds; and from institutional banks, including JP Morgan.

Relationships have been an important part of JP Morgan’s success. The bank has placed No. 1 in the institutional loan market for the past 25 years and has occupied the bond market’s top spot for 10 straight years.

Alster estimated that the financing market this year will be largely driven by consolidation, especially since last year was dominated by debt refinancings.

“Last year, refinancing was still a large portion of the volume,” Alster said. “Going forward, it’s going to be more corporate-to-corporate and M&A related financing. The fundamentals are strong, suggesting that it could be a good year in our market.”

Alexandra Barth, Managing Director and Co-Head of High Yield Capital Markets for the Americas, Deutsche Bank

About 12 years ago, Alexandra Barth moved from being an analyst with Deutsche Bank’s media and telecom investment banking group to its leveraged debt capital markets team, focusing on high-yield bonds. She added clients and responsibilities in the chemicals, industrial and equipment-rental sectors, as well as media and telecom. And she gained first-hand experience in practically every aspect of running a company in those dynamic businesses.

“I liked the transactional nature of being on a debt [team],” Barth said, adding that the fast pace and hands-on advisory aspects of the discipline also appealed to her. She also has been able to maintain her client relationships as an analyst. Sometimes, there’s also problem-solving involved. One such client was WIND Telecom, an Italian telco that wanted to structure a deal that would allow it to refinance its debt while still allowing room for any possible future M&A.

“We figured out a way to extend out the capital structure at a lower rate, but also allow them to potentially merge with another company without having a huge amount of breakage costs,” Barth said.

Earlier this month, WIND restarted talks with Hong Kong-based Hutchison Whampoa about a possible acquisition.

For WIND, Barth and her team have led about five deals for a total of $11.8 billion.

On the media and telecom side, she also has served as “left bookrunner” for eight deals for satellite-TV giant Dish Network totaling $12.1 billion; and 13 deals for more than $14 billion, including for EchoStar Communications.

She’s also served as left bookrunner for four transactions for wireless carrier T-Mobile amounting to more than $12.6 billion. And she has led nine transactions for Univision Communications since the Spanish-language broadcaster’s 2007 leveraged buyout, totaling $6 billion.

“I think there has been a pretty meaningful evolution of the high-yield market over the past 12 years,” Barth said. “The size of the high-yield market has increased significantly; now it’s a trilliondollar market.”

Much of that has to do with interest rates remaining low, which has made the bond market attractive. Although clients are still adamant about keeping leverage ratios in check, Barth said, she expects the high-yield market to continue on its torrid pace.

“I think the environment creates an interesting opportunity for larger transactions, a broader scale of potential M&A that could be financed in the debt markets,” Barth said.

Marc Birenbaum,Managing Director, Leveraged Finance Group, Wells Fargo Securities

Marc Birenbaum joined Wells Fargo Securities in 2004 from Banc of America Securities, where he serves clients and financial sponsors in the Technology, Media, Communications and Leisure industries. He has covered these sectors exclusively for 18-plus years, focused on the origination, structuring and execution of both loan and high-yield leveraged financings.

He got his start in the media industry while at NationsBank, where he worked in the Leveraged Finance Group and participated in transactions including leading the financing to fund Welsh Carson’s purchase of assets from GTE to form Valor Telecom (which later merged with Windstream) and a 12.75% senior subordinated discount note offering for AT&T Wireless affiliate Tritel PCS.

That led to other notable deals — in 2014, he served in leadership roles on high yield and bank financings of $2.0 billion for CenturyLink; $1.4 billion across four transactions for Mediacom Communications; $175 million for Wave Broadband; $200 million for Consolidated Communications, in conjunction with financial advisory work for the acquisition of Enventis; and $2.3 billion across two transactions for SBA Communications.

He has also been involved as a “left lead” in financings for Windstream and TW Telecom (now Level 3), and as a bookrunner for Midcontinent Communications and Harron Cable.

While Birenbaum works closely with his M&A counterparts at Wells Fargo, helping to structure and underwrite transactions to provide the most flexible capital structure solutions and financing, he said that content also is playing an increasing role in transactions today.

“Creating content to provide entertainment, education or experiences engages the consumer and connects the viewer to your brand,” he said. “Not surprisingly, it remains the key driver of value across all media today.”

Birenbaum is optimistic concerning this year’s deal market.

“Cable and telecom remain a highly regarded sector in the leveraged finance market,” Birenbaum said. “We should continue to see companies take advantage of the current low rate environment to further extend maturities and optimize their capital structures. In addition, we will likely see a good amount of strategic financing activity during the year, including the publicly announced spin of GreatLand Connections, as well as continued consolidation in the cable and fiber/infrastructure space. M&A within the overall telecom industry should remain active, as demonstrated by Verizon’s recently announced divestiture of towers and select wireline assets.”

Marco Caggiano,Managing Director, Mergers and Acquisitions Group, JP Morgan

Marco Caggiano has been part of JP Morgan’s M&A group for 15 years, the last 10 or so on the media side, and has helped a lot of deals cross the transom. And though he has seen the business change dramatically in the past decade, there is one constant.

“The ultimate goal now is the same as it was 10 years ago, which is creating shareholder value and how you best do that,” Caggiano said. “What has evolved is the significant consolidation among content players and distribution players.”

Caggiano has been on both sides of the table when it comes to content and distribution deals. He has served as an adviser to Comcast in its pending $67 billion acquisition of Time Warner Cable. Over the years, he has advised General Electric when it sold its controlling stake in NBCUniversal to Comcast in 2009, and on AMC Networks’s acquisition of a 49% interest in BBC America from BBC Worldwide for about $200 million last October.

More recently, Caggiano and JP Morgan advised Frontier Communications in its $10.5 billion acquisition of wireline assets from Verizon Communications.

Caggiano’s role can be twofold: He and the JP Morgan M&A team provide clients with advice on the financial and strategic elements of a particular transaction and, in the case of longstanding clients, can help them identify and find potential M&A targets.

Caggiano looks for more cable consolidation on the distribution and content sides. “The strategic rationale for combinations is there,” he said. “The potential partners need to determine what is feasible in the regulatory environment in which they are operating.”

While the biggest buzz in the industry has concerned the potential threat of over-the-top players to the distribution business, Caggiano said content companies are also weighing their participation in OTT. “Many of the content players are trying to figure out what their over-the-top strategy is going to be and whether it can be advanced through M&A. A lot of the discussions taking place now are centering around whether build, buy or partner is the optimal path.”

William Drewry,Managing Director, and Marcos Torres,Managing Director, RBC Capital Markets

Both Drewry and Torres are key players in RBC Capital Markets’s broadcast and media investment banking operations.

Drewry has been a managing director at RBC Capital Markets since 2011, after stints as chairman and operating partner at private equity firm Diamond Castle Holdings and as a managing director at UBS and global head of media equity research at Credit Suisse. At RB C, Drewry has advised clients on successful transactions including Discovery Communications, Vice Media, Belo, Disney, Cumulus Media, Viacom, Legendary Pictures and Bleacher Report.

Torres, who joined the company in 2012, heads up the broadcast unit and has advised on several top deals in the sector, including Berkshire Hathaway’s $445 million investment in Media General; General Electric’s sale of NBC Universal to Comcast ($37 billion valuation); Crown Media/Hallmark Channel’s $540 million debut public financing; and Ticketmaster’s $2.5 billion merger with Live Nation. A former JP Morgan investment banker, Torres was part of NBC Universal’s mergers and acquisition group from 2005 to 2007 and was the deal team leader for the restructuring of the MSNBC cable network joint venture, the acquisition of various TV assets for Telemundo, and the acquisition of various digital media properties.

Blair Effron,Partner, Co-Founder, Centerview Partners

Blair Effron formed Centerview Partners in 2006 with two top investment bankers — former Wasserstein Perella president Robert Pruzan and former Morgan Stanley co-president Stephen Crawford — with an eye toward creating a boutique investment bank that provided more personal and independent financial advice to clients.

Most recently, he was one of several advisers to Time Warner Cable in its pending $67 billion merger with Comcast. He advised TWC’s independent board. TWC’s advisers were Citigroup managing director, global head of technology, media and telecom M&A Ketan Mehta; Allen & Co. managing director Nancy Peretsman and Morgan Stanley global head of mergers and acquisitions and vice chairman Robert Kindler.

Time Warner Cable chief financial officer Artie Minson said Effron’s approach was to stay very closely coordinated with all parties involved “while also balancing a need he had to provide his firm’s independent view to the board.”

“They rolled up their sleeves and spent a lot of time with me, understanding our business plan, sanity checking it, making sure they agreed with it,” Minson said.

Centerview came in after Charter had made its formal bid for Time Warner Cable, an offer the TWC board rejected as too low.

“He very much fits the mold of adviser and strategist,” Minson said. “He also knew, and we all were very clear that we knew, the best outcome was likely a transaction with Comcast. He was very helpful as we thought about different ways things would play out and being a sounding board and a strategist on that.”

The merger boom went bust shortly after Centerview (named for the view of Rockefeller Center from the firm’s 19th floor offices) set up shop in 2006.

The firm weathered the storm, though, with a core of high-profile and high-powered clients, including News Corp., Altria, H.J. Heinz and PepsiCo.

Since then, the company has added even more media clients, and Effron has personally been involved in deals such as General Electric’s $18 billion sale of the remaining 49% interest in NBCUniversal to Comcast; News Corp.’s $6 billion acquisition of Dow Jones, the $9 billion spinoff of its publishing assets and its acquisitions of Shine Media and (pending) Harlequin Enterprises.

Effron started his investment banking career at Dillon Read, then at UBS, where he was among the most senior bankers in the organization. He was group vice chairman of UBS AG and a member of the board of UBS Investment Bank, where he also sat on several management committees. In his 25-plus-year career, he has advised Fortune 500 and multinational companies across a range of sectors, including consumer and retail, general industrial, health care and media.

Robert Kindler,Vice Chairman of the Institutional Services Group and Global Head of Mergers & Acquisitions, Morgan Stanley

While Robert Kindler took what could be called a typical path toward M&A investment banking — graduating from New York University Law School in 1980 — he traveled a few atypical side roads.

According to profiles, he received his degree from Colgate University in 1976 in music and romantic poetry, and is an accomplished flautist. At one point he dropped out of law school for a year to make sure he was on the right career path, working at his father’s plumbing business.

He even, according to Marketwatch, owned an ice cream shop in Katonah, N.Y. (razzleberry was his specialty), while he worked out his future career path.

Lucky for the media industry, Kindler stuck with the law, and after graduation joined powerhouse Cravath Swaine and Moore as an associate.

About 20 years later he was head of the firm’s M&A practice and had been involved in some of the top deals of the time, including AOL’s 2000 purchase of Time Warner.

Wanting a change, in 2000 he left Cravath for JP Morgan Chase as global head of Mergers & Acquisitions. Over the next six years, he became involved in transactions totaling $200 billion, including Comcast’s $72 billion acquisition of AT&T Broadband, DreamWorks SKG’s $4 billion spinoff of DreamWorks Animation and Nextel’s $42 billion merger with Sprint.

In 2006, he joined Morgan Stanley, and in the past eight years Morgan Stanley and Kindler have been in on most of the bigger M&A deals in media and elsewhere, culminating in his becoming an adviser to Time Warner Cable in its $67 billion acquisition by Comcast.

Morgan Stanley was one of several advisers to Time Warner Cable in the Comcast deal; the bank has had a long-term relationship with the cable operator. It also was an early confidant as Time Warner Cable fought off unsolicited offers from Charter Communications.

“He’s the consummate adviser,” Time Warner Cable chief financial officer Artie Minson said of Kindler. “There are bankers and there are real advisers, and Rob has been to Time Warner and was to this transaction just a great adviser. He has the ability to be both very strategic and to be very tactical.

“Sometimes you have people who have one skill or the other; he has both. He often puts himself in the other guy’s shoes and what they were thinking so we were able to plan a few steps ahead. He’s certainly one of those people that if you wound up in another situation like this, would be one of your first calls.”

Ken Klassen,Managing Director, RBC Capital Markets

Ken Klassen is a managing director and group head of Communications, Media, Entertainment, Technology, Healthcare and Consumer, Corporate Banking and is responsible for all of RBC Capital Markets’s lending relationships in the media, telecommunications, entertainment, technology, health care and consumer industries. A 25-year veteran of the financial services industry, Klassen transitioned to the New York office of RBC in 2005, having spent four years with the firm in Toronto. Prior to that, Klassen held senior corporate banking and investment banking positions with TD Securities in Toronto.

RBC Capital has been a major player in the corporate and investment banking side of media, and the company expects the momentum that began with transactions like Comcast-Time Warner Cable, AT&T-DirecTV, Media General-LIN Media and others will continue this year.

“2015 is expected to be another busy year for media M&A, as companies continue looking for ways to grow cash flow, increase overall scale, and defend their existing competitive positioning,” RBC Capital Markets said in a statement.

Today, RBC continued, M&A transactions are larger and more complex and receive a heightened level of regulatory scrutiny, requiring a 360-degree approach to client service.

“It is no longer good enough to simply have a great M&A idea or to have the balance sheet to finance a large M&A transaction,” the company said in a statement. “It is equally important to be able to navigate complex issues such as valuation, consideration mix, pro forma governance/control, and heightened regulatory concerns.”

One example of this approach is Media General’s $2.5 billion acquisition of LIN Media, closed last December. RBC served as adviser to Media General in a deal that not only was complicated financially— it was stock and cash — but involved combining two different boards of directors, a new CEO from the acquired company and a requirement to divest assets in overlap markets.

“This transaction required a very deep understanding of the key issues on both sides as well as quick and thoughtful solutions that bridged gaps in the negotiations,” RBC said.

Arthur Roselle,Partner, Pamlico Capital Partners

Ask Pamlico Capital Partners partner Art Roselle what drives deals on the private-equity side of the cable business, and he will have a quick answer — relationships.

Nowhere is that more evident than in one of his longest-standing cable partnerships with one of the pioneering families in the cable industry, the Gleasons.

Pamlico first advised long-time cable executive James Gleason in 2002 when he and his brother Tom formed New Wave Communications, a Sikeston, Mo.-based small and midsized market cable operator that at one point had more than 100,000 subscribers.

Pamlico and Roselle helped Gleason create New Wave, eventually sell it and then build his latest venture — Clarity Communications, doing business as Vast Broadband.

According to Roselle, who joined Pamlico in 1999 after stints with R-H Capital Partners and Robinson-Humphrey, the Gleason relationship is typical of the middle-market private equity fund, which focuses on small markets and strong management teams.

“We’ve backed some really good management teams that know how to operate in smaller markets, and know how to build a local brand in smaller towns and smaller communities,” Roselle said.

“Jim’s a really good operator,” Roselle said. “He does it the right way. He really cares about the communities that they serve, the people that work for them and, over time, that creates a culture that builds good companies and builds good value.”

As an example, Roselle said Gleason was traveling to Sioux Falls, S.D., on the weekend of Feb. 14 to attend the local system’s annual winter employee party. “Not everybody does that. It’s one community we serve, in February, in South Dakota and on a weekend. Those things are easy to skip if you’re the CEO and live 1,000 miles away. He doesn’t skip that stuff.”

Gleason had equal praise for Roselle and Pamlico, which has been a tireless deal partner over more than a decade.

New Wave alone did 14 transactions during its life, all of them including Pamlico. When Gleason started his next venture — Clarity Telecom — in October 2014, Pamlico and Roselle were again by his side.

Pamlico advised Clarity in its acquisition of about 53,000 customers in Sioux Falls and Rapid City, S.D., from WideOpenWest for about $262 million in December 2014.

“They [Pamlico and Roselle] bring a lot of credibility to the table and Art in particular does, when it comes to banks and brokers as well,” Gleason said. “We have benefitted from the reputation that Art has by being able to get some of those deals we’ve done in the past, because banks realize they are going to be treated fairly; brokers and sellers realize they are going to get the deal done. They have a lot of integrity when it comes to getting deals done.”

Paul J. Taubman, Founding Partner, PJT Partners

Paul Taubman started PJT Partners in 2012 after about 30 years at Morgan Stanley, the last several as co-president of its institutional securities unit, which included its investment banking and sales and trading units.

He retired from Morgan Stanley shortly after it named co-president Colm Kelleher as sole head of the unit, and the quiet-but-driven banker has let the deals do the talking for him ever since.

In the two years after setting up his own shop, Taubman single-handedly landed two of the sweetest and most lucrative deals in the sector — assisting Verizon in its $130 billion acquisition of Vodafone Group’s 45% interest in their wireless joint venture in 2013 (which helped him crack the top 20 among deal advisers that year), followed by advising Comcast in its $67 billion takeover of Time Warner Cable in 2014.

The Vodafone deal put PJT Partners on the map, vaulting it into the top ranks of media dealmakers. Taubman was ranked No. 11 on the Thomson Reuters M&A league tables, what The New York Times has called Wall Street’s equivalent to the Major League Baseball standings, the first time the paper said an individual was ranked that high on the list.

The Comcast-TWC deal only further solidified Taubman’s reputation as a brilliant banker who can get the job done.

Taubman has a long history with Comcast: While at Morgan Stanley he advised Comcast in its $52 billion deal in 2002 to acquire AT&T Broadband, making it the largest pay TV provider in the land at the time.

He also advised the cable provider in its massive push into the content business, via the 2009 acquisition of a controlling interest in NBC Universal from General Electric.

“Paul has been deeply involved in most of our transactions and has been an insightful adviser to us,” Comcast chief financial officer and vice chairman Michael Angelakis told Multichannel News. “His strategic thinking and ability to innovate with financial structures makes him one of the leading M&A advisers around.”

Later this year, Taubman will be in charge of even more, as a planned merger with The Blackstone Group’s advisory service is completed. Taubman will serve as chairman and CEO of the new venture and, along with his partners and former Blackstone employees, will own 35% of the venture. Blackstone will own the remaining 65% of the publicly traded entity.